On Thursday, Georgia Governor Brian Kemp restated his straightforward argument for litigation caps: They will stop the rise in insurance premiums.
However, the truth is more nuanced. Modifications can lower the price of liability insurance for companies and owners of commercial real estate.
There is conflicting information regarding whether it would result in significant savings on auto and other insurance premiums.
According to some academics, initiatives to reduce lawsuits—often referred to as tort reform—increase insurers’ profits more than they lower policy prices.
This year, Kemp’s major priority is the problem.
His recommendations include reexamining Georgia’s laws about what constitutes business liability for accidents sustained on company premises, ensuring that people only seek damages for self-paid medical bills, and prohibiting attorneys from presenting jurors with pointless figures in an attempt to obtain larger verdicts.
“After months of listening to our citizens, businesses, and stakeholders across the spectrum, it is clear the status quo is unacceptable, unsustainable, and jeopardizes our state’s prosperity in the years to come,” Kemp stated. “This tort reform package protects the rights of all Georgians to have access to our civil justice system, and ensures that those who have been wronged receive justice and are made whole.”
Kemp contends that the rise in unjust lawsuits and the disproportionate damages awarded by juries is the reason why insurance costs are rising.
As other states did last year, he also suggested a number of structural adjustments to the lawsuit process, including ensuring juries are aware of whether a seatbelt was worn in an automobile accident and whether third-party funders were involved.
Are large jury verdicts and unjust litigation actually issues?
Some claim that there is no proof that high insurance premiums are being caused by a nationwide lawsuit issue.
I went in search of the data, and I have not found it,” California Western School of Law professor Kenneth Klein said. That’s not to say it doesn’t occur. That is to say, we are unable to record it.
However, when it comes to setting rates and distributing losses, insurance firms want predictability, according to Mike Iverson of Oakbridge Insurance and a former president of the Independent Insurance Agents Association.
Kemp’s program does not include the common idea of capping noneconomic damages. In 2010, the Georgia Supreme Court declared the caps were unconstitutional.
Kemp pushed for a statute requiring Georgia Insurance Commissioner John King to collect data in 2024, despite having previously assured the Georgia Chamber of Commerce that he would act sooner.
Following a shooting in an Atlanta CVS parking lot, a jury in a well-known case gave a man over $43 million, arguing that the firm ought to have increased security. In another instance, the daughter of a man who was shot and murdered at a Jonesboro mobile home park was awarded $31 million.
According to King, those who suffer the most from the ensuing high rates are business owners in locations that insurers classify as having a high crime risk. Owners of apartments and trucking companies, especially those who provide low-income accommodation, also voice their displeasure.
Critics point out that insurance firms continue to turn a profit and that few verdicts are that big. They want politicians to insist on greater openness on their rate-setting process.
Joanne Doroshow, executive director of the Center for Justice & Democracy at New York Law School, stated, “Whenever they want an excuse to raise rates or limit coverage, they will always point to a verdict here and there and make all kinds of claims about how it’s affecting their bottom line.”
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What influences rates?
Inflation, severe weather, and labor and material expenses are additional factors that affect insurance premiums. Insurance markets frequently go through difficult years during which less coverage is available as rates increase.
According to data from the National Association of Insurance Commissioners, insurers in Georgia were less lucrative in 2022 than in a number of other states in several lines of coverage, including ones that were not significantly impacted by lawsuits.
However, a spokeswoman stated that nothing about Georgia’s swings is unusual over a longer time frame.
According to King’s analysis, which mostly uses data from motor insurance, both the quantity of claims and the magnitude of the consequent payments have increased over time, particularly those involving lawsuits.
King also discovered that a higher proportion of court cases are leading to payouts that exceed the maximum sum that an insurance policy will pay.
King’s findings are contested by the Georgia Trial Lawyers Association, a group that advocates against tort reform.
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The amount of claims is consistent with Georgia’s high rate of auto accidents, according to risk consultant David Stegall. According to him, claims and payouts have largely been constant or declining, particularly when inflation and population growth are taken into account.
Additionally, he discovered that Georgians are more than 200% more likely to get in an accident than people in other states, despite paying between 11% and 68% more for auto insurance.
The trade-offs of litigation restrictions, according to proponents of the current system, are not good.
